Wednesday, October 31, 2018

Scratch That

I made a mistake. And it's a good thing.

Following up on my Running on Empty post, I wanted to give a more finely-grained analysis of climate costs relative to GDP growth, so I returned to my sources to see who their sources were and how they did their calculations. Watson et al., compiled their estimate from National Centers for Environmental Information, "U.S. Billion Dollar Weather and Climate Disasters" and Paulina Jaramillo and Nicholas Muller, "Air pollution emissions and damages from energy production in the U.S. 2002-2011."

Jacobson, Delucchi et al. presented their estimates in two tables, broken down by country. I had taken what I thought was 15% of their global climate cost estimate but it turns out that my number was roughly double theirs. I may have taken their high estimate instead of the mean. Anyway their actual estimate was around $4 trillion in 2013 dollars. But that is not the mistake I am concerned with here.

The mistake came to light after I had all the carefully checked numbers, recalculated in 2012 dollars and I compared annual GDP growth to annual health and climate costs. Climate costs exceeded growth in 13 of the 28 years from 1990 to 2017. Over the entire period those costs offset 95% of reported real GDP growth. Or so the numbers claimed.

Then I tried a different tack. I subtracted estimated annual climate costs from GDP and then calculated annual growth. To my surprise the resulting annual growth was only somewhat lower. O.K., I thought, I'm starting from a much lower total in the base year and the year-to-year number reflects only the the annual increase in climate costs and not the annual cost.

So which calculation, then, is the "right" one? Year-to-year growth minus annual cost or Year-to-year growth of (GDP minus climate cost)? Neither! Both calculations rely on double counting of the sort that Irving Fisher warned about 112 years ago.

The problem is also illustrated by the relationship between GDP and Net Domestic Product. Annual growth of Net Domestic Product and Gross Domestic Product track each other pretty closely:

Meanwhile, look at what has happened to depreciation. It has nearly doubled as a percentage of GDP, from around 9% in the late 1940s to almost 17% in recent years.

Something that doesn't show up too well in the graph above is that most of the growth in depreciation relative to GDP has occurred in the last 48 years. So, doubling every half century we could have an economy in 125 years that runs entirely on depreciation! But that would be O.K. because GDP would be so much BIGGER then. Isn't that right, Professor Nordhaus? Professor Solow? Professor Krugman?

I don't have the solution to this computational problem, other than to point out that it is the inevitable consequence of a poorly-conceived metaphor for the "measurement" of heterogeneous good and services. The monetary yardstick is made of a highly elastic material and correction for changes in the cost of a basket of consumer goods (CPI) does not begin to address the real issue. GDP and GDP growth has become the increasingly opaque lens through which we view society and "the economy." It is a cracked, scratched, smudged, distorting lens that may not even enable us to tell whether what we view through it is upside up or upside down.

Monday, October 29, 2018

Business As Usual: Running on Empty

A little over a year ago, Robert Watson, former chair of the IPCC, and two co-authors published a report titled "The Economic Case for Climate Action in the United States." Based on trends over the past few decades, the authors estimated the current total annual cost in the U.S. of losses from weather events intensified by climate change and health damage from fossil fuel pollution to be $240 billion, which they described as "about 40 percent of current economic growth of the United States economy."

At around the same time, Mark Jacobson, Mark Delucchi and a carload of co-authors published an article in which they projected damages to health and property in the U.S. from climate change and pollution under "business as usual" to be around eight trillion dollars in 2050. A simple linear extrapolation between the two estimates suggests that the annual cost of climate change is increasing at around an 11 percent annual rate. Based on that extrapolation, the health and property damage cost of climate change can be projected to exceed annual GDP growth by 2026.

But wait. Watson's 40 percent figure compares average annual damage with some of the better recent years of growth. Even excluding years of recession and stagnation, in which growth was less than $240 billion, the remaining eight of the last 12 years averaged only around $430 billion a year in real GDP growth. Counting the recession and stagnation years, it's virtually break even.

But there's more. Part of that economic growth simply reflects expansion of the population. Real economic growth per capita in the U.S. has been even more anemic in the 21st century. Of course this means the cost of damage can be spread more thinly as well but the crucial point is still what happens to per capita income relative to the damage.

The future is hard to predict, so I tried a number of scenarios. First, if per capita growth continues at the rate it has since 2009, the U.S. has already entered the red zone where the cost of climate change exceeds growth by an increasing amount each year. If real per capita growth accelerates to 1.5 percent per annum that fateful point won't be reached until the year after next. A growth rate of 2 percent would postpone the day of reckoning until 2024, six years before the IPCC deadline for achieving net zero carbon emissions. To make it to 2030 without crossing permanently into the red would require a sustained rate of real per capita growth that hasn't been achieved since 1960-1970.

One more thing. As Andreas Malm wrote, the global warming effects of fossil fuel consumption are "seriously backloaded" and "substantially deferred." This year's climate damage is a consequence of actions taken decades ago and the greenhouse gases emitted today will not have their full impact until decades from now. How does one estimate, then, the contribution to intermediate consumption of the deferred cost of current emissions? How much should GDP be deflated to account for the artificial inflation of nominal value added by waste gases whose cost is off the balance sheet?

Let's assume that emissions in a given year contribute to 4 percent of climate change costs each year for the next 25 years. Why 25 years and why a constant percentage? Because it is better than attributing all of this year's cost to this year's emissions. Who knows? It probably makes more sense that choosing a "market-based" consumption discount rate of 4.3 percent. At any rate, considering the deferred nature of the climate costs moves the year in which GDP growth vanishes back. The 4 percent for 25 years scenario moves it back to 2007. The economy has literally been running on fumes for over a decade. Talk about "degrowth"!

It/s here. It's not going away. It only gets worse. The question isn't whether or not one "advocates" degrowth but whether or not one faces the stark reality and acknowledges the expiry of GDP growth and consequently the irrelevance -- and, frankly, mischief -- of the growth paradigm.

Saturday, October 27, 2018

Failed Perceptions Of Economic Reality

It is long  viewed that what the electoral populace thinks of the state of the economy is an important factor in how they vote and electoral outcomes.  Prior to 2000 the state of the economy as measured by real per capita  GDP growth explained presidential election outcomes except in cases where there was a war (!940) or there was a party split (1912).  Personal scandals also played roles, with Ford's defeat in 1976 at least partly due to his pardoning of Nixon.  2000  and 2016 had personal scandal issues involved in outcomes that went against the state of the economy (although 2016 a closer call on that), although in both of those elections we had the electoral college installing a president not favored by the national popular vote.

Midterm elections are not so closely tied to economic conditions as they have certain patterns based on the president and when he was elected, with midterms generally not favoring presidents. Nevertheless, economic conditions do play a role, with Reagan taking a big hit in 1982, even as he won big two years later when the economy turned around.

So now we have the economy doing well in terms of GDP growth, a 4,2% growth quarter followed by a  3.5% one, looking better than many forecast, despite some negative signals such as recent bad performance of the stock market. How will all this play out in the upcoming midterm elections?

To be honest, I do not know.  But it strikes me that most of the electoral populace is not in touch with actual current economic reality. It goes on both sides. So, the side that I tend to favor tends to understate the returns people received from the GOP tax cut.  Now I did not and do not support this tax cut for various reasons, but indeed it did hand out money to the vast majority of the population.  But now by nearly 2 to 1, the US populace says they got nothing from it, and they oppose it as mostly giving money to the rich and adding to the budget deficit. All the latter is correct, of course, so it the populace are not complete fools. But in fact most of them did get some gain from this tax cut. But then, back in 2009-10 when Obama gave most of the population a tax cut, most of them did not notice  it and were unaware they had gotten it.  The hard fact is that people only notice big changes in their take home income, and neither Obama's nor Trump's tax breaks were big enough for most people for them to notice it.

Needless to say, while many did not notice the  tax cut  Trump gave them, those favoring Trump are not noticing that the vast majority of the US population has not seen increases in real per capita income.  Trump's tax cut for the majority of the population was too small to overcome the hard fact that real wages have remained largely stagnant.  GDP growth has been high in the last two quarters, but is declining, and  for a variety of reasons is likely to continue downwards.  The recent volatility of the stock market shows these concerns, ranging from Trump's trade wars, creeping inflationary trends, and rising interest rates, not to mention bad markets and slowdowns abroad.

Barkley Rosser

Tuesday, October 23, 2018

"The Opportunity Cost of Socialism"

Why is the Council of Economic Advisers producing party political propaganda for the GOP? As many folks have pointed out, the "report" is rather bizarre. My favorite part is Figure 1, which summarizes Milton Friedman's argument that people spending "their own money" are "more
careful how much to spend and on what the money is spent." This, of course begs the question of how that money came to be defined as "their own."

Let's complicate that story, though, with a couple more matrices: First, Prisoner's Dilemma:
Figure 2: Prisoner's Dilemma
Next, Elinor Ostrom's typology of property:

Figure 3: Typology of property

Figure 1 assumes that there is only one kind of decision situation and only one kind of good. Figure 2 introduces a different kind of decision situation and Figure 3 introduces three different kinds of goods. Are Trump's "economic advisers" really so ignorant of basic economic concepts beyond the most elementary textbook simplification?

How To Get Distracted From What Is Most Important

Of course as the midterm elections are nearly upon us, there is a rising cacophony of issues bubbling up, especially as Donald Trump attempts to excite his extremist base with base fears, while trying to distract most voters from threats by GOPs in Congress to cut the social safety net.  But smoe of the the new issues bubbling up are really more important than others.

So we are now going to have a spectacle every day from now to the election of having top stories on nearly all media focusing on this caravan of Hondurans approaching the US.  Trump declares this to be a national security crisis, which his fervent followers clearly hysterically accept.  But even if this entire group were allowed into the US, it would be no big deal, probably good for our economy and society. 

OTOH, we have the news over the weekend that Trump is planning to withdraw the US from the INF nuclear treaty, signed in 1987 by Reagan and Gorbachev.  The still living Gorby has declared that doing so is "stupid."  That is putting it mildly.  This appears to be the brainchild of super-hawk John Bolton, now in Moscow, where he is also soft soaping Russian meddling in US elections.  But talk is that if INF goes, so will New START, leaving almost no nuclear arms treaties in place between Russia and the US.  Yes, Russia has been reportedly violating the INF treaty in some cases, but is just throwing out an arms control apparatus that took so long to negotiate the way to go?  Bolton clearly thinks so, but he has also talked about how maybe we should use nuclear weapons, echoing loose similar talk coming out of some Russians earlier.  There is also talk of a renewed arms race, which our military-industrial complex would love.

Really, this seems to be coming basically out of nowhere.  Are we to return to a Cold War and arms race and fearing a nuclear war?  It took decades for Thomas Schelling to convince world leaders with nuclear weapons to foreswear the first use of them.  Now he is dead, and we are suddenly hearing all this loose talk and possible unraveling.  Frankly, this is far more dangerous than this Honnduran caravan, but it is back page news, and I fear most people are unaware of it, more worried about Central American immigrants than that the threat of nuclear destruction of the entire human species is suddenly increasing.  We must not be so easily distracted.

Barkley Rosser

Sunday, October 21, 2018

Absolute Decoupling and Relative Surplus Value: Rectification of Names

Jargon is a heck of a drug:
If names be not correct, language is not in accordance with the truth of things. If language be not in accordance with the truth of things, affairs cannot be carried on to success.
The discourse of global warming/climate change is lousy with jargon. This rampant obfuscation gives science deniers rhetorical leverage and induces hallucinations about "Green New Deals" and "Environmental Kuznets Curves." "Decoupling," "rebound effects" and "externalities" are three terms that invite systematic incomprehension. The first two are dead metaphors and the third is an outright fraud -- there is nothing "external" about an externality.

A little reflection on what these terms actually refer to can help clarify what can and cannot be done about carbon dioxide emissions. From the perspective of shameless self-promotion, it can also help show why my policy proposal makes sense and others don't.

Saturday, October 20, 2018

Kevin Hassett and Irwin Steltzer Join in on the Fiscal Dishonesty

Brad DeLong is annoyed at the latest from Irwin Stelzer:
Hassett and others in the administration point out that despite a hefty reduction in the corporate tax rate from 35 percent to 21 percent, government revenues rose by $3.3 trillion in the fiscal year just ended. In part this is because the economy is growing at around a 4 percent rate in response to the tax cuts and to a revival of animal spirits as entrepreneurs and corporate chieftains wake up in the morning wondering not what the government is going to do to them, but what it might do for them. So Trump may yet be proven right. And if that proof does not emerge by 2020, he an always blame the Fed. The problem, says Trump, is that spending rose even more, by $4.1 trillion.
Hassett is lying but let’s note so are the OMB Director and the Treasury Secretary as well as Speaker Paul Ryan:
He was basically lying to us hoping the public would be too stupid to realize that when the price level rose by 2.5% during the same period, we are talking about a 2% real decrease in tax revenues.
Yes nominal government spending rose by 3.2%, which represents only a 0.7% real increase. Spending and revenues both fell relative to GDP. Brad correctly notes:
his claim that under Trump economic growth is "around... 4%". It is not. GDP growth under Trump has been and is widely projected to be roughly 2.7% per year, not "around... 4%". Irwin Stelzer is a liar. Liars are not worth reading.
While true – Trump’s entire economic team has been lying but quoting nominal changes rather than real changes. So maybe Stelzer was talking about the increase in nominal GDP. Yes – that is dishonest but hey – everyone on Team Trump is doing this.

Thursday, October 18, 2018

Fiscal Dishonesty from Paul Ryan (Surprise!)

We earlier noted that when our Treasury Secretary wrote this:
Government receipts totaled $3,329 billion in FY 2018. This was $14 billion higher than in FY 2017, an increase of 0.4 percent...Outlays were $4,108 billion, $127 billion above those in FY 2017, a 3.2 percent increase.
He was basically lying to us hoping the public would be too stupid to realize that when the price level rose by 2.5% during the same period, we are talking about a 2% real decrease in tax revenues. And it seems that some nitwit at CNBC was indeed that stupid. Yesterday I endured an appearance by Paul Ryan on CBS This Morning. No surprise that this dishonest weasel repeated the same lie:
Revenues are up this year. Believe it or not, we cut taxes at the beginning of the year, and we have higher revenues this year. Why do we have higher revenues? Because we have faster economic growth, higher wages, more taxes are coming into the government.
But let’s give credit to John Dickerson for calling Ryan on this intellectual garbage:
Dickerson pushed back, pointing out that when you account for inflation, some of the revenues from the previous tax policy, and the revenue that would increase from population, the revenues are lower than they should be.
I would say Dickerson nailed this liar but how did Ryan respond?
Let me just say it this way. We cut taxes and we have higher revenues coming into the government today still.
Got that? He just repeated his debunked lie. After all Paul Ryan has such total disdain for the public that he simply doubled down on this incredibly stupid dishonesty.

MBS Must Go

The grisly details of the murder of journalist Jamal Khashoggi now coming out make it clear that the one thing that would really clear the air would be for 33-year old Muhammed bin Salman bin Abdulaiz al Sa'ud (MBS) to be replaced as Crown Prince of Saudi Arabia and to be removed from any position of authority and power that he currently possesses.  Indeed, it would be wise if he were subjected to what he imposed on others whom he saw as in his way to assuming the  extreme level of power he currently has in KSA, to be confined to his palace under guard or perhaps in the Ritz-Carlton Hotel.  To make clear his removal from power it would also be appropriate to have da Vinci's painting of Salvador Mundi taken from him, which he is reported to have purchased through intermediaries for $480 million, a sign of the degree of corruption that he has personally engaged in.

It should be clear that MBS's crimes and mistakes go far beyond this awful mmuder by members of his personal bodyguard of Khashoggi.  The thousands of dead civilians in Yemen in the war there that he instigated as Defense Minister is at the top of the list.  But his idiotic embargo of Qatar and his hyper-aggressive attitude towards Iran (stupidly supported by the current US administration) are also on the list, along with his broader suppression of disssidents within KSA.  It may well be that a successor will continue the strongly anti-Iran policy, although some potential candidates have in the past urged negoatiating with Iran, including former ambassador to the US, Turki bin Faisal bin Abdulaziz al Sa'ud, for whom the now late Jamal Khashoggi once worked as a top staff aide.  However, for a variety of reasons this 73 -year old now Chair of the powerful King Faisal Foundation is unlikely to succeed MBS.

Obviously this is not very likely, given that this would have to be done by his father, 82-year old King Salman bin Abdulaziz bin Abdul Rahman al Sa'ud, who clearly strongly supports him, even as he has apparently overruled him on certain matters, most recently in insisting on the shutdown of the proposed sale of 5% of ARAMCO, a centerpiece of MBS's Vision 2030, an overly hyped economic reform plan that always had less of any significance to it than was loudly advertised in US media.  Nations overwhelmingly dependent on oil exports are always talking about "getting off oil," but they rarely succeed in doing so, and there is probably no nation more stuck on oil than KSA, given the low cost of extracting oil there (second lowest after Kuwait at barely $10 per barrel) and its vast reserves.

Of course, for now MBS appears to have the personal support by President Trump and his son-in-law, Jared Kushner, who may have quietly supported the coup through which he came to power.  It is fairly clear that this personal support is reinforced by MBS providing substantial funding to both the Trump Organization and the business activities of Kushner, although the full details of that are not fully known.

MBS has been praised for restricting the Mutaween religious police as well as letting women drive and opening cinemas.  If he were to go it is certainly possible the Mutaween might regain some of their power, but I seriously doubt any possible successor would undo the move to let women drive.  Indeed,,several of his possible successors had previously shown willingness to improve the status of women in KSA in various ways.

There are several possible successors who would not be either over the hill or widly conservative.  The most obvious would be the man MBS overthrew in what was essentially a coup in June, 2017 as Crown Prince, now 59-year old Muhammed bin Nayef bin Abdulaziz al Sa'ud.  He was widely respectes, including by those in the US who dealt with him, a former Minister of the Interior.  It was alleged that he had become addicted to a pain killer as a result of an assassination attempt against him, but it is unclear if this was true or not.  In any case, there are others who  are capable and would return KSA to its more collective form of leadership that did not engage in the sorts of barbaric activities that MBS has been doing.

A curious recent development not not widely reported out of STRATFOR is that MBS's full brother, Khalid, ambassador to the US, was recalled to Riyadh on October 15 and will not return to the US.  Whether this shows MBS getting rid of yet another potential rival or is a sign that MBS himself is in trouble is too soon to know.


One is that in today's (10/19) WaPo, the generally well-nformed David Ignatius reports that it looks like there is a serious split in the Saudi royal family. This probably is the moment to call for MBS to go.  Probably he will hang on, but it looks like he has some serious opposition.  The supposed most likely replacement would be one of his uncles, Ahmad bin Abdulaziz bin Abdul Rahman al Sa'us, born  in 1942, who was briefly Interior Minister some years ago, only to bee pushed aside by Mohammed bin Nayef bin Abdulaziz, who would become Crown Prince, only to be deposed in a coup by MBS.  Apparently Ahmad was a candidate and now is agaiin, although he has not held that many senior positions and holds none now, but is reportedly not corrupt and well liked.  His full brother, the youngest of the sons of KSA founder Abdulaziz, is Muqrin, born in 1945, who was Crown Prince prior ro Mohammed bin Nayef, ans has held many serious senior positions, including Director of the Mukhabarat inttelligence outfit from 2005 to 2012.  But, aside from having a Yemeni wife, he does not seem to be in the running, according to Ignatius, who posted a number of other sharp points.  Another thing going for Ahmad is that he is the youngest of the very powerful Sudairi Seven, with the only other one of those around being  the current king, Salman, MBS's father.  Presumably having his last full brother step in to replace MBS might have some appleal to Salman, who really does u.timately hold the cards on this.

Curiously, Ignatius made a rare errror in his column.  He siid that Ahmasd is the last of Abdulaziz's sons to survive.  In fact, including the king, there are nine of them, the oldest, Bandatr, having been born in 1923.  Most of them are viewed as being unacceptable for one reason or another.

A further curious and not widely reported item is that Jamal Khashoggi's paternal grandfather was Turkish.  That is a Turkish last name, and the "gg" is actually pronounced, "gchi."  The grandfather was the physician for old King Absulaziz, and Jamal had a wealthly and powerful uncle, Adnan Khashoggi, who was quite an operator. This adds a rather poignant touch to his being killed in Turkey while trying to marry a Turkish woman.

Tuesday, October 16, 2018

Fiscal Dishonesty from CNBC and Our Treasury Secretary

Is Jacob Pramuk on the White House payroll?
US budget deficit expands to $779 billion in fiscal 2018 as spending surges. The federal budget deficit rose 17 percent in fiscal 2018, according to the Trump administration. Spending jumped, and revenue only increased slightly following the GOP tax cuts. The Trump administration has pushed for dramatic budget cuts at several agencies and supported massive increases in military spending.
And that was just his headlines!
The deficit increased by $70 billion less than anticipated in a report published in July, according to the two officials. Federal revenue rose only slightly, by $14 billion after Republicans chopped tax rates for corporations and most individuals. Outlays climbed by $127 billion, or 3.2 percent.
He is getting his numbers from this report:
Government receipts totaled $3,329 billion in FY 2018. This was $14 billion higher than in FY 2017, an increase of 0.4 percent...Outlays were $4,108 billion, $127 billion above those in FY 2017, a 3.2 percent increase.
I have skipped the chest thumbing about the economy from Mnuchin and Mulvaney to focus on the stupidity ala CNBC. Real government spending barely kept pace with inflation, which is why outlays relative to GDP fell from 20.7% to 20.3%. Real tax revenues clearly fell in absolute terms and as a percent of GDP went from 17.2% to 16.5%. I guess this is what one gets when one lets Lawrence Kudlow become a chief economic adviser. But this kind of dishonesty is well known ever since Kudlow and his ilk tried to pull this intellectual garbage in the 1980’s. Does anyone at CNBC not realize the Trump White House is playing the same games with numbers? Never mind that the Treasury Department has decided to lead the way on some good old fashion rightwing nonsense.

Who Is The Bigger Terrorist Threat: Iran Or Saudi Arabia?

Yesterday's WaPo had competing headlines about Iran and KSA (Saudi Arabia): Iran is described as a "potential" terrorist threat while the likely Saudi role in the death of journalist Jamal Khashoggi is described as threatening the US-KSA relationship.  The latter problem (likely to be smoothed over by claiming it was done by "rogue agents") has distracted from the ongoing story of how Iran is this awful enemy and threat to the US, "the world's leading state sponsor of terrorism" as organs oof the US government repeatedly tell us.  The problem is that in recent years there have been zero terror attacks by entities principally funded by Iran. 

The new story reports on "potential" attacks, with the most serious possibility being in Europe, where indeed in thr 80s and early 90s Iranian MOIS apparently killed as many as 60 opponents of its regime in various attacks in Berlin and other locations. An Iranian embassy official based in Vienna has  been arrested in Bavaria in connection with an alleged plot to attack Mujahedin-el-Khalq (MEK) activists near Paris, which plot was foiled.  As it is, the MEK was labeled a terrorist group itself by the US government until 2012.  It may be that such a plot was in the making, but it did not happen.  Regarding the US two supposed Iranian spies were arrested in the US who may have been plotting something, but again, no actual attacks, and there is a related report that at least one spy supposedly supported by Iran working for Hezbollah went to the FBI to offer to become an informant but was arrested.  Ah ha!  Another terrorist!

Of course, there is the usual complaint that Iranian forces are in Syria and Iraq, but they are in both nations at the invitation of their governments.  Iran supports Hezbollah in Lebanon, but like Iran itself it ceased engaging in terror attacks in any serious way back in the 90s and is now too busy ruling Lebanon to mess with such stuff.  There are also claims they arm the Houthis in Yemen, but most evidence says they do little of that, and the main problem there comes from the US-Backed Saudis bombing the Yemenis, including civilians.

Which brings us to the Saudis.  So now people are suddenly questioining the close US alliance with them after this Khashoggi business.  But they are the ones bombing and killing civilians in large numbers in Yemen.  They have supported al Qaeda related groups in Syria.  It was fro KSA that most of the bombers on 9/11 came from.  And while the Saudis may now have allowed women to drive, women were never kept from driving in Iran.  The  Saudi-funded madrassas all over the world have been major breeding grounds for Sunni terrorists of various factions and stripes.  Really, this is a no-brainer.  It is the KSA that is a much more serious terror threat than Iran.

Barkley Rosser

Giving Up On Fighting Global Warming

That is what Robert J. Samuelson did in yesterday's Washington Post (I have not picked on him for awhile, time to gt back at it).  The new UN report on global climate change has brought from him a giant shrug of the shoulders along the lines of, so what?  He makes three arguments.

The first is that we do not have the technology to do anything.  Only 4% of total energy is coming from renewables he says, by which he means solar and wind. But there is also geothermal, hydro, and nuclear.  They add up to quite a bit more.  Maybe we have reached the limits on the first two and lack political will to do more on the third, although it is still expanding in China and in some other nations.  But this seems overly pessimistic.

Then he gets into a rant about how in the US there is no focus on the future.  That may be true, but emphasizing that seems to be just giving up.  Every other nation in the world has signed the Paris Accord. Just because the current US administration has pulled out does not mean we cannot get back into it.

Finally he notes that we shall likely see further emissions from poorer nations, especially China and India.  That is certainly true.  But China in particular has begun to move against GHGs, and India is leading the world in efforts to develop clean and safe nuclear power using thorium the US gave up on in the 1950s because one cannot make nuclear weapons from it.  Really.  None of this seems like we should do nothing.

Just to make himself look really ridiculous, on the second argument he goes back to one of his longstanding bugaboos.  He concludes his argument on the lack of future orientation in the US by denoucing the lack of change in Social Security and Medicare, presumably meaning cuts in benefits as he has long advocated.  For me personally, I oppose this as I want to see my children and grandchildren get the same benefits I shall get.  I oppose cutting those benefits  out of my concern for future generations.  This is probably the most  shameful part of what is already a pretty shameful piece by him.

Barkley Rosser

Friday, October 12, 2018

U.S. Saudi Trade

Donald Trump appears to be reluctant to investigate the murder of Jamal Khashoggi because of an alleged trade deal?
Donald Trump has said US investigators are looking into how Jamal Khashoggi vanished at the Saudi consulate in Istanbul, but made clear that whatever the outcome, the US would not forgo lucrative arms deals with Riyadh. The president’s announcement raised concerns of a cover-up of evidence implicating Saudi Arabia’s powerful crown prince, Mohammed bin Salman, in plans to silence the dissident journalist…Any sense that the administration might seek to impose serious consequences on Saudi Arabia was dispelled by the president. Asked at an impromptu press conference in the Oval Office whether the US would cut arms sales if the Saudi government was found to be responsible for Khashoggi’s disappearance, the president demurred, saying the US could lose its share of the huge Saudi arms market to Russia or China. In the Oval Office Trump pointed out that the disappearance took place in Turkey and that Khashoggi was not a US citizen.
He may not be a citizen but he did hold a green card and worked for the Washington Post. Credit to the Republicans in Congress for pressing on the appropriate investigation of this matter. My only comment today will be to challenge Trump’s argument that our trade with Saudi Arabia is more important than sanctioning the Saudi government for this murder likely ordered by Mohammed bin Salman. The Census Bureau reports on both our imports from Saudi Arabia and our exports to them. Over the last decade, imports have varied from less than $17 billion per year to over $55 billion. These imports are predominantly been oil of course. Exports have never reached $20 billion per year so we have run persistent and sometimes large deficits with the Saudis. In Trumpian “logic” – aren’t we losing to them? To be fair, we choose to import Saudi oil but then again, the kingdom is not the only supplier of this commodity. But Trump is telling us that we may have yuuuge exports of military goods:
I know they’re [Senators] talking about different kinds of sanctions, but they’re [Saudi Arabia] spending $110 billion on military equipment and on things that create jobs, like jobs and others for this country. I don’t like the concept of stopping an investment of $110 billion into the United States.
Of course this figure is considered “fake”. Maybe the Saudis will purchase more military goods in the future than they have in the past. But as the Census Bureau notes, their 2017 purchases were a mere $2 billion whereas the Saudis purchased over $2.7 billion in civilian aircraft and $1.6 billion in automobiles. I’m sure Boeing, Ford, and GM enjoy exporting their products wherever they can but these amounts are indeed peanuts compared to the world market for automobiles and airplanes.

Wednesday, October 10, 2018

The Political Economy of the Working Class

The political economy of the working class is pluralist.

The political economy of the working class is pragmatic.

The political economy of the working class is critical.

Karl Marx chronicled and contributed to the political economy of the working class. He did not invent, conclude or supersede it. In  his Inaugural Address to the International Working Men’s Association, Marx celebrated the first victory of the political economy of the working class, the passage, in 1847, of the Ten Hours' Bill:
This struggle about the legal restriction of the hours of labor raged the more fiercely since, apart from frightened avarice, it told indeed upon the great contest between the blind rule of the supply and demand laws which form the political economy of the middle class, and social production controlled by social foresight, which forms the political economy of the working class. Hence the Ten Hours’ Bill was not only a great practical success; it was the victory of a principle; it was the first time that in broad daylight the political economy of the middle class succumbed to the political economy of the working class.
This passage tells us what we most need to know about the political economy of the working class. It is founded upon "social production controlled by social foresight" in opposition to "the blind rule of supply and demand laws." The "most notorious organs of science" had predicted and "proved" that "any legal restriction of the hours of labor must sound the death knell of British industry" and, of course, they were subsequently proved absolutely wrong. Not 'merely' wrong, but the exact opposite of apposite.

The political economy of the working class is innovative.

The political economy of the working class is traditionalist.

The political economy of the working class is eclectic.

The first victory of working class political economy Marx spoke of occurred 17 years before his inaugural address, 20 years before publication of Das Kapital and a year before The Communist Manifesto. It would be anachronistic to give credit for that outcome to Marx's analysis or agitation. Moreover, Marx says that the victory culminated 30 years of struggle, which would make the political economy of the working class at least older than Marx.

The political economy of the working class is conservative.

The political economy of the working class is revolutionary.

Why does this even matter? It matters because the alternative between "social production controlled by social foresight" and "the blind rule of supply and demand laws" cannot be reduced to Marxism vs. non-Marxism or socialism vs. capitalism. It is instead a contest between collective wisdom and a very peculiar sort of solipsistic, motivated passivity. If there ever was such a thing as "laws" of supply and demand, they would only be self-enforcing to the extent that market participants were not aware of them. As soon as those regularities are observed, they will be gamed.

It also matters because units of  radically different type lie at the heart of the two political economies. The political economy of the middle class is denominated in monetary units, while the political economy of the working class revolves around qualitative as well as quantitative time. The limitation of the length of the working day confers "physical, moral, and intellectual benefits" above and beyond simply "more time off" and a better bargaining position for wages. "After all their idle sophistry, there is, thank God! no means of adding to the wealth of a nation but by adding to the facilities of living: so that wealth is liberty -- liberty to seek recreation -- liberty to enjoy life -- liberty to improve the mind: it is disposable time, and nothing more."

Andres Malm tells us that with passage of the Ten-Hours Bill in 1847, "Water power received its coup de grâce." "If labour scored a gain in the Acts of 1847 and 1850, capital retaliated by speed through steam." "[A]ccording to Von Tunzelmann, the Ten Hours Act was 'probably the most important determinant' of the rise of high-pressure steam and, by extension, the final victory of the engine in the cotton industry (and beyond)."

So, there you have it. The great victory of the political economy of the working class over the political economy of the middle class had the unintended consequence of completing the victory of fossil fuel over renewable but erratic water power.

But, of course the story doesn't end there. Might not the same political economy of the working class act as a lever in the transition away from fossil fuels? The IPCC 1.5° C Report and the Ten-Hour Week

Tuesday, October 9, 2018

The IPCC 1.5° C Report and the Ten-Hour Week

I read the IPCC summary for policy makers so you don't have to. You may have heard that CO2 emissions have to fall by 45% by 2030 to avoid the possibility of overshooting 1.5°C global warming. Actually emissions must decline by 45% from 2010 levels, which are already substantially lower than 2018 levels. The strategies for reducing emissions by that amount are quite complex and depend on hundreds of governments adopting scores of policies that they have no intention of adopting.

So, burn in climate catastrophe Hell, grandchildren!

But wait! Didn't Keynes write something long ago about the economic possibilities for our (their) grandchildren? "What can we reasonably expect the level of our economic life to be a hundred years hence?" Keynes asked that in 1930 -- which just happens to be a hundred years before the IPCC 2030 target date! What about the ecological survival possibilities for our grandchildren?

I have translated the IPCC report into terms compatible with Keynes's prognostications. Remember his prediction of a 15-hour week being "quite enough to satisfy the old Adam in most of us"? How rapidly and how steeply would we have to reduce workweeks to achieve the 45% reduction in emissions by 2030, assuming no other changes in technology (or population)?

I've taken quite a few short-cuts to calculate these estimates. For starters, I only look at the twenty top emitters of CO2 from 2015. I assumed that emissions reductions targets for each country should be allocated on the basis of convergence toward a uniform emissions per capita standard, which would be 45% below average emissions per capita in 2010 (for the 20 countries).

Several countries among the top twenty currently emit fewer tons per capita of carbon dioxide than the hypothetical 2030 standard. These include Brazil, India and Indonesia. Mexico is currently emitting close to what its 2030 quota would be. So my estimates are concerned only with the remaining 16 countries.

To achieve emissions reduction through hours and population limitations alone would require annual reductions in working time of between one percent for Turkey and twelve percent for Saudi Arabia. Also near the top end are the U.S., Canada and Australia at around an eleven percent per annum reduction. With considerable rounding and a generous allowance for holidays and vacations, these reductions in annual hours would indicate a workweek in 2030 of around ten hours.

In the middle range, France and the U.K. could look forward to workweeks of around 20 hours a week. China, currently the world's largest emitter of CO2 would see its workweek cut to somewhere in the neighborhood of 25 hours per week.

Of course some of these reductions in working time could be reversed by de-industrialization -- that is the substitution of less energy intensive but more labor intensive methods of production. Hours reduction could also be moderated by transition to solar and wind energy, by energy conserving technological advances and by the introduction of carbon-capture technologies, including large-scale reforestation.

This hours reduction exercise is only meant to give a simplified view of the scale of transition required. But it also alludes to an earlier transition that consolidated the central place of fossil fuels in an expanding industrial economy.

In 1847, after decades of struggle by factory workers, the U.K. parliament passed the Ten Hours Bill. In response, manufacturers turned to the high-pressure steam engines to compensate for the loss of factory working time with faster, more powerful, more fuel efficient machinery that could do more work in less time. By the end of the 1850s, steam power had decisively eclipsed water power and high-pressure steam had surpassed the low-pressure Watt steam engine.

It was not the intention of the ten-hour legislation in the mid-19th century to deliver the "coup de grâce," to water power, as Andreas Malm termed it, but that was its effect. Might not a working time policy designed and intended to enforce a transition away from fossil fuels be worthy of serious consideration?

Monday, October 8, 2018

Nobel Prizes in Economics, Awarded and Withheld

Most of the commentary today on the decision to award Nobel prizes in economics to William Nordhaus and Paul Romer has focused on the recipients.  I want to talk about the nonrecipient whose nonprize is perhaps the most important statement by the Riksbank, the Swedish central bank that decides who should be recognized each year for their work in economics “in memory of Alfred Nobel”.

Nordhaus was widely expected to be a winner for his work on the economics of climate change.  For decades he has assembled and tweaked a model called DICE (Dynamic Integrated Climate-Economy), that melds computable general equilibrium theory from economics and equations from the various strands of climate science.  His goal has been to estimate the “optimal” amount of climate change, where the marginal cost of abating it equals the marginal cost of undergoing it.  From this comes an optimal carbon price, the “social cost of carbon”, which should be implemented now and allowed to rise over time at the rate of interest.  In his first published work using DICE, from the early 1990s, he recommended a carbon tax of $5 a tonne of CO2, inching slowly upward until peaking at $20 in 2085.  His “optimal” policy was expected to result in an atmospheric concentration of CO2 of over 1400 ppm (parts per million) at the end of this planning horizon, yielding global warming in excess of 3º C.  (Nordhaus, 1992)

Over time Nordhaus has become slightly more concerned with the potential economic costs of climate change but also more sanguine about the prospects for decarbonized economic growth, even in the absence of policy.  In his latest work he advocates a carbon tax of $31 per tonne in 2015, increasing at 3% per year over the following century.  This too would result in more than 3º warming.  To give a sense of how modest his suggestion is, consider that, in the same paper, Nordhaus calculates that the most efficient carbon tax to limit warming to 2.5º is between $107-184 per tonne depending on assumptions.  The target of the Paris Accord is 2º, and most scientists consider this an upper bound for the amount of warming we should permit.

What do these “optimal” tax numbers mean?  Based on the carbon content of gas, each $1 carbon tax translates into a one cent tax on a gallon of gas at the pump.  If we adopted Nordhaus’ suggestion for carbon pricing, the result would be minuscule compared to the year-to-year fluctuations in energy prices due to other causes.  In other words, while his prize is being trumpeted as a statement from the Swedish bankers on the importance of climate change, in fact he is a key spokesman for the position, rejected by nearly all climate scientists, that the problem is modest and can be solved by easy-to-digest, nearly imperceptible adjustments to energy prices.  If we go down his road we face a significant risk of a climate apocalypse.

But Nordhaus is not the only climate economist on the block.  In fact, he has been locked in debate for many years with Harvard’s Martin Weitzman.  Weitzman rejects the entire social-cost-of-carbon approach on the grounds that rational policy should be based on the insurance principle of avoiding worst-case outcomes.  His “dismal theorem” demonstrates that, under reasonable assumptions, the likelihood of tail events does not fall as rapidly as their degree of catastrophe increases, so their expected cost rises without limit—and this applies to climate scenarios.  (I explain this graphically here.)  Not surprisingly, Weitzman's work is often invoked by those who, like me, believe much more aggressive action is needed to limit carbon emissions.

It also happens that Weitzman is a giant in the field of environmental economics quite apart from his particular contribution to the climate debate.  He did the original work on environmental policy under uncertainty and has contributed significantly to other areas of economic theory.  (His analysis of the uncertainty problem is explained here.)  Even if the greenhouse effect never existed he would be a candidate for a top prize.

Because of this, whenever economists speculated on who would win the econ Nobel, the Nordhaus scenario was always couched as Nordhaus-Weitzman.  (For a recent example, see Tyler Cowen, who adds Partha Dasgupta, here.)  It seemed logical to pair a go-slow climate guy with a go-fast one.  But as it happened, Nordaus was paired not with Weitzman but Paul M. Romer for the latter’s work on endogenous growth theory.  I won’t take up Romer’s contribution here, but what is interesting is that the Riksbank committee chose to yoke together two economists whose work is only loosely related.  I can’t recall any forecaster ever predicting a joint prize for them, no matter how much commentators have scrambled to justify it after the fact.

The reality is this is a nonprize for Weitzman, an attempt to dismiss his approach to combating climate change, even though his position is far closer to the scientific mainstream than Nordhaus’.  An example of the enlistment of the uncritical media in this enterprise is today’s New York Times, where Binyamin Appelbaum writes:
Mr. Nordhaus also was honored for his role in developing a model that allows economists to analyze the costs of climate change. His work undergirds a new United Nations report on the dangers of climate change, released Monday in South Korea.
Wrong.  The work Nordhaus pioneered in the social cost of carbon is mentioned only twice in the IPCC report, a box in Chapter 2 and another in Chapter 3.  The reason it appears only in boxes is that, while the authors of the report wanted to include this work in the interest of being comprehensive, it plays no role in any of their substantive conclusions.  And how could it?  The report is about the dangers of even just 1.5º of warming, less than the conventional 2º target, and far less than the 3+º Nordhaus is comfortable with.  Damages are expressed primarily in terms of uninhabitable land and climate refugees, agricultural failure and food security, and similarly nonmonetary outcomes, not the utility-from-consumption metric on which Nordhaus’ work rests.

The Nordhaus/Romer combo is so artificial and unconvincing it’s hard to avoid the impression that the prize not given to Weitzman is as important as the one given to Nordhaus.  This is a clear political statement about how to deal with climate change and how not to deal with it.  The Riksbank has spoken: it wants a gradual approach to carbon, one that makes as few economic demands as possible.

Nordhaus, William. 1992. An Optimal Transition Path for Controlling Greenhouse Gases. Science. Nov. 20. 258(5086): 1315-1319.

Nordhaus, William. 2017. Revisiting the Social Cost of Carbon. PNAS. 114(7): 1518-1523.

Saturday, October 6, 2018

The Susan Collins Excuse

I listened very carefully to Senator Collins as she detailed her excuses for letting Brett Kavanaugh become a Supreme Court Justice. Two aspects of her speech were particularly absurd and kind of appalling. Her claims that Kavanaugh is a moderate akin to Justice Stevens were beyond absurd. The most appalling aspect of her speech was how she dismissed the claims that Kavanaugh sexually abused women in high school and/or college:
Some of the allegations levied against Judge Kavanaugh illustrate why the presumption of innocence is so important. I am thinking in particular not at the allegations raised by professor Ford, but of the allegations that when he was a teenager Judge Kavanaugh drugged multiple girls and used their weakened state to facility gang rape. This outlandish allegation was put forth without any credible supporting evidence and simply parroted public statements of others. That’s such an allegation can find its way into the Supreme Court confirmation process is a stark reminder about why the presumption of innocence is so ingrained in our a American consciousness. Mr. President, I listened carefully to Christine Blasey Ford’s testimony before the Judiciary Committee. I found her testimony to be sincere, painful, and compelling. I believe that she is a survivor of a sexual assault and that this trauma has upended her life.
She believes Dr. Ford but then she went on and on like a defense attorney why she did not believe her when she clearly said it was Kavanaugh. But the real stunner was when she said this:
I do not believe that the claims such as these need to be proved beyond a reasonable doubt. Nevertheless, fairness would dictate that the claims at least should meet a threshold of more likely than not as our standard. The facts presented do not mean that Professor Ford was not sexually assaulted that night or at some other time, but they do lead more to conclude that the allegations fail to meet the more likely than not standard.
I guess “the facts presented” is the key aspect as we know the FBI was not allowed to pursue corroborating evidence, which is why this episode is clearly absurd. But does Senator Collins truly grasp this more likely than not concept? I’m an economist not a lawyer but I have worked with tax attorneys and accountants on the transfer pricing aspects of tax provisions under FIN 48:
Under the Interpretation, absent the existence of a widely understood administrative practice and precedent of the taxing authority, an enterprise cannot recognize a tax benefit in its financial statements unless it concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority, based solely on the technical merits of the associated tax position. In this evaluation, an enterprise must assume that the position (1) will be examined by a taxing authority that has full knowledge of all relevant information and (2) will be resolved in the court of last resort.
Let’s key in on “full knowledge of all relevant information”. I have seen multinationals trying to convince financial auditors not to impose tax reserves based on some suspect report that key intercompany prices are arm’s length and where material information was not disclosed. In my experience, the financial auditors would refuse to give FIN 48 clearance until this information was disclosed and properly evaluated. It is well known that the latest FBI inquiry literally ran away from material information that may have corroborated Dr. Ford’s testimony. So when Senator Collins raises this More Likely Than Not standard – she should know better given the fact relevant information was not properly explored. Nicole Belle makes a strong case that the Republicans even knew ahead of time that Dr. Ford’s allegations are true:
Don't Kid Yourself. The GOP KNOWS Kavanaugh Tried To Rape Someone ... The FBI notifies the White House of the letter to see if they want follow-up. The White House declines further investigation. But now they know. And now they pass it on to GOP operatives. Early August. So now, Kavanaugh, the FBI, the White House AND GOP operatives all know. BEFORE the hearing even begins. So now the PR campaign goes into overdrive.
Read the entire thing as it explains a lot of the Republican fake anger at Senator Feinstein, which was all a gigantic smoke screen to disguise the fact that the Republican operatives were doing all they could to demean Dr. Ford, pump up Kavanaugh, and evade any real investigation. Senator Collins little More Likely Than Not sort of puts this in the domain of civil litigation rather than criminal charges where the standard is:
preponderance of the evidence - n. the greater weight of the evidence required in a civil (non-criminal) lawsuit for the trier of fact (jury or judge without a jury) to decide in favor of one side or the other. This preponderance is based on the more convincing evidence and its probable truth or accuracy, and not on the amount of evidence. Thus, one clearly knowledgeable witness may provide a preponderance of evidence over a dozen witnesses with hazy testimony, or a signed agreement with definite terms may outweigh opinions or speculation about what the parties intended.
Suppose Dr. Ford chooses to file a civil lawsuit against Brett Kavanaugh and Mark Judge. What then? We would have actual discovery if this lawsuit is allowed. Then again I bet Kavanaugh would hire some slime ball lawyers to squash this lawsuit even if they had to take it to the Supreme Court where Justice Kavanaugh could file the fifth vote in favor of his own motion.

"Lock Her Up!!!"

For several years now we have all grown accustomed to the fact that President Trump likes to go to rallies of his supporters where they relentlessly chant the subject head of this post.  It has always referred to his opponent in the presidential election of 2016, the person who got about 3 million more votes than he did, even as he managed to win in the determining electoral college.  While I recognize that Hillary Clinton has many flaws, she has been investigated more times than I can count for many alleged offenses, some of which I suspect she is guilty of, even as some of them were pretty minor (see financial shenanigans back in Arkansas).  She also was subjected to many Congressional investigations by several committees for many alleged offenses, including her notorious getting emails in her home like her three predecessors did, although none of them were ever so investigated. She even had 8, really 8, investigations of her role in the Benghazi fiasco, these costing taxpayers many millions of dollars.  The final one involved her  sitting for 11 hours straight while a GOP led committee interrogated her, ending up with them looking like a bunch of exhausted foolish idiots while she looked  cool as a cucumber. The final bottom line is that none  of those investigations led to even an indictment for anything.

A peculiar sideshow on this is that among the more bizarre investigations of her, costing millions of US taxpayer dollars, was that in 1998 by the Starr group of the chance that she had been responsible for the death of Vincent Foster, who committed suicide on the GW Parkway.  The person advocating this investigation of a conspiracy theoty and engaging in it, only to find a big fat nothing, was none other than Brett Kavanaugh, apparently about to be confirmed to be the  next lifetime member of the US Supreme Court.

So now we come to why I am posting this.  This past Tuesday President Trump attended a rally in Mississippi where he mocked Dr. Christine Blasy Ford on her memory lapses in connection with her allegations about Kavanaugh sexually asssaulting her.  In fact Trump lied about certain parts of what she failed to remember, notably the year it happened and where in the house it happened, which in fact she reported under oath.  For this lying, Trump was rewarded with the chant he usually gets at his rallies, the chant usually directed at the not likely to be indicted or prosecuted or jailed Hillary Clinton, but now apparently at Dr. Ford, who even if her memonty is flawed is not remotely near being guilty of any crime, that now nauseating chant of "Lock he Up!"  And even after this abysmal display by Trump and his supporters, or perhaps more disturbingly precisely because  of it, Brett Kavanaugh will be sitting on the Supreme Court of the United States for a very long time.

Barkley Rosser 

Monday, October 1, 2018

I Was Wrong: US-Mexico Trade Deal Lives With Canada: USMCA Rarher Than NAFTA

At the last minute last night the US and Canada cut a deal, so now Canada is on on the deal to change NAFTA to USMCA.  I think the name change is the biggest part of it, even though Trump still claims that NAFTA was "the worst trade deal ever" and the new deal makes relatively minor changes in it, especially if one considers what would have been the case if the US had actually joined the TPP, as most of the environmental, labor, and intellectual property parts of the new deal (the environmental and labor parts largely improvements, if not too dramatic) were already agreed to by Mexico and Canada when rhey joined TPP, which they belong to along with all its other members aside from the US.

Beyond continuing NAFTA and adding the TPP parts, the main changes are in the auto industry and the dairy industry, the former mostly affecting Mexico, the latter mostly affecting Canada.  Between the restrictions on outsourcing and the $16 per hour limit on imports, there may be some shifting of auto parts production from Mexico to the US and possibly Canada as well.  This will lead to job losses in Mexico, but there may be some Mexican autoworkers who see wage boosts also.  The auto deal has little impact on Canada aside from Trump retracting his threat to impose tariffs, which was opposed by GM and Ford as well as the UAW thanks to the profound integration between the US and Canadian auto industries.

However, it must be noted that while there may be some increase in production and employment in the US auto parts sector, there is likely to be other damage to the US auto industry.  The new rules will increase costs on top of the existing steel and aluminum tariffs, which were not removed by this agreement, although both Mexico and Canada wanted them to be removed.  So  US consumers will be hurt, but the higher costs will make all auto exports from the three nations less competitive, and indeed US auto exports have been declining in recent months, something likely to accelerate after this deal really goes in.  It is quite unclear whether there will be a net gain or loss for employment in the US auto industry overall as a result of this.

Regarding dairy, well, Scott Walker gets some help in Wisconsin as indeed there will be some increased exports to Canada of dairy products, especially powdered milk and infant formula.  Apparently the opening is not as big as being advertised, and this looks to be where Trump made some give.  Probably overall US dairy industry is getting about 50% of what was asked for.  I note that dairy was never part of NAFTA, so I guess it will now officially be part of the new USMCA. 

I cannot leave this without noting that while the Canadian dairy industry has been heavily protected (and Canadian consumers might get a gain in lower dairy product prices), the US government has long subsidized the US dairy industry.  My favorite outcome of that was that the USDA long bought butter surpluses and piled them up in an underground "butter mountain" near Madison, WI.  Quite a few years ago that mountain caught fire and burned for about three months.  I think those subsidies have been reduced, but it is not the case that all the protectionism and subsidies have been on the Candian side rather than the US side.

Anyway, I prefer to admit that I am wrong upfront before somebody points it out, and I was on this one.  Lighthizer and others pulled out the deal at the last minute, even if it is not that big of a deal.

Barkley Rosser